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  • Home
  • About
    • Our Mission
    • Our Staff
  • Jobseekers
    • Why Join our Elite Team?
    • Qualifications & Representation Process
    • Positions We Fill
    • Nanny Application
    • Household Staffing Application
    • Job Board
    • Blog
  • Families
    • Why Families Trust Caring Nannies
    • Screening & Placement Process
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    • Family Permanent Application
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    • Temporary Services
    • Resort Nanny
    • Newborn Care Specialists
    • Events and Weddings
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  • Contact
    • Monday - Friday

      9:00AM - 5:00PM

June 6, 2013 Blog By admin No Comments

HAVING A SUMMER BABY? HOW TO SAVE THOUSANDS ON YOUR TAXES WITH AN FSA

Did you know that in the U.S. there are more babies born during the summer than any other season of the year? It’s one of the reasons that demand for professional childcare reaches a peak during the summer. So, it’s a good time to remind everyone about Flexible Spending Aaccount enrollment. For families who have just given birth – or are about to welcome a new member to their household – this edition of The Legal Review local placement agency,nanny,, Memorial Day, placement counselor, tax and payroll obligations, will share a simple tip worth as much as $1,500.

The Situation
A couple gave birth to their first child on April 19. In early May, they began working with a local placement agency to find a nanny so the mom could go back to work after Memorial Day. With about a week to spare, they found the perfect nanny. As the family worked with the agency to finalize the employment paperwork for their nanny, the family’s placement counselor provided them with information about their tax and payroll obligations as a household employer and shared the good news about tax breaks. The family told her that they had not enrolled in their company’s Flexible Spending Account but would do so in the subsequent year.

Having read through the Expert Advice section of our website, the counselor remembered that there were some special opportunities to enroll in the middle of the year if you just had a baby. So, she advised the family to talk to their HR people as soon as possible.

The Law

Families with childcare expenses are entitled to tax breaks to help offset some of the costs. There is no income restriction on the tax breaks, so all families qualify as long as their children are under age 13 and both spouses are working, looking for work or are full-time students.

The most lucrative tax break is the Dependent Care Account (also referred to as “Flexible Spending Account” or “FSA” as part of a company’s “Cafeteria Plan”). If one of the spouses has access to this benefit, the family will be able to pay for up to $5,000 of childcare expenses using pre-tax dollars. That means the family has no taxes on that portion of their income. This benefit saves most household employers between $2,100 and $2,300 per year, depending on the state they live in and their marginal tax rate.

Enrollment in the FSA is limited to once a year (most companies do open enrollment in the fall for the subsequent tax year). However, there is a 30-day window after “life-changing events” where the family can enroll mid-year and the birth of a child is one of the qualifying events. If families miss that window, they can still take advantage of the Child and Dependent Care Tax Credit when they file their federal income tax return. However, this tax break saves a maximum of $600 per year for families with one child or $1,200 per year for families with two or more children.

The Outcome

Upon speaking to the HR person, the family learned more about the 30-day window for life-changing events and they were able to enroll in the FSA program for the current tax year. Given the family’s marginal tax rate, they will be able to take advantage of $2,100 in tax savings for the 2013 tax year.

Without that tip from the counselor, the family would have missed the enrollment window, which would have forced them to settle for the Child and Dependent Care Tax Credit’s $600 worth of tax savings. That $1,500 of additional savings will pay for a lot of diapers and baby food!

How to Ensure Your Familily Maximizes Your Tax Savings
Unfortunately, it is extremely common for families to miss out on enrolling in an Flexible Spending Account after the birth of a child. As first-time parents become first-time employers, there is a lot of new information to process and 30 days is not a lot of time to know everything about being a household employer.

That’s why our partnership with Breedlove & Associates offers the families who are working with us a New Employer Orientation free of charge. This 10-minute, no-pressure, no-obligation phone call allows a Breedlove & Associates tax expert to assess the family’s unique situation and provide guidance on all the tax and labor law issues that will come into play for them. Whether they decide to use their comprehensive payroll, tax and HR service or not, this guidance will likely save them thousands of dollars and dozens of hours.

888-BREEDLOVE (888-273-3356)

www.breedlove.com

Tags: 30 day window, Breedlove & Associates, Dependent Care Account, Enrollment in FSA, Flexible Spending Account, FSA enrollment, household employer, New Employer Orientation, Newborn, payroll and tax service, pre-tax dollars, professional childcare, summer baby, tax and payroll obligations, tax breaks, tax expert, taxes
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June 30, 2012 Blog By admin No Comments

Don’t Let The Flexible Spending Account Window Pass You By

From our friends at Breedlove and Associates . . .
The Flexible Spending Account Window

Summertime is upon us. Since more babies are born in the summer than any other season, it’s a good time to share a very simple tip that can save new parents up to $1,700.

The Situation
A couple gave birth to a baby boy on July 3, 2011. In mid-July, they began searching for a nanny so the mom could go back to work after Labor Day. With about 2 weeks to spare, they found the perfect nanny.
When the mom went back to work, she learned that they had missed out on a major tax break.
break.
The Law
Families with childcare expenses are entitled to tax breaks to help offset some of the costs of care. (There is no income restriction on the childcare tax breaks so everyone qualifies — as long as the children are under age 13 and both spouses are working, looking for work or full-time students).
The most lucrative childcare tax break is the Dependent Care Account (commonly called a “Flexible Spending Account” or “FSA”). FSAs are federal tax breaks offered through business employers as an benefit to their employees. If either one of the spouses has access to an FSA through their company, the family will be able to pay for up to $5,000 of childcare expenses using pre-tax dollars. That means the family has no taxes on that portion of their income,

which will save them between $2,100 and $2,300 per year, depending on their marginal tax rate.

Enrollment in the FSA is limited to once a year (most companies offer open enrollment in the fall for the subsequent tax year). However, there is a 30-day window after a “life-changing event” (i.e. birth of a child) when the family can enroll immediately — allowing them to take advantage of this tax break during the current tax year.
When families don’t have access to a Flexible Spending Account (or miss the 30-day window enrollment opportunity), they can utilize the Child and Dependent Care Tax Credit when they file their federal income tax return. This tax credit allows families to itemize up to $3,000 per child per year (maximum of $6,000 per year). After the 20-35% tax credit is applied to those expenses, most families will save $600 per year if they have one child and $1,200 per year if they have 2 or more children.
The Outcome
  • Because the family missed the 30-day window for life-changing events, they were not able to enroll in their FSA program for the 2011 tax year, and therefore, missed out on $2,300 in savings.
  • Instead, they had to settle for the Child and Dependent Care Tax Credit using Form 2441 when they filed their federal income tax return. The tax credit saved them $600 in 2011.
  • The difference between the two tax breaks for this family was $1,700 ($2,300 – $600). That $1,700 in extra tax breaks would have paid for a lot of diapers!
How It Could Have Been Avoided
Unfortunately, this story is extremely common. As first-time parents become first-time employers, there is a lot of new information to process. During this busy stage of life, families need expert guidance and support throughout the nanny search and hiring process. Without it, oversights, mistakes and missed opportunities happen regularly — especially in the tedious and complex world of household employment tax and labor law.
As a remedy, Breedlove offers a New Employer Orientation free of charge. This 10-minute no-pressure, no-obligation phone call allows a Breedlove household employment expert to assess the family’s unique situation and provide expert guidance on all the tax and labor law issues that will come into play for them. Whether they decide to use their “nanny tax” service or not, this guidance will likely save thousands of dollars and dozens of hours.
888-BREEDLOVE (888-273-3356)
www.myBreedlove.com
Tags: Babies, Breedlove and Associates, Child and Dependent Care Tax Credit, Childcare Tax Breaks, Dependent Care Account, Dual Income Families, Federal Income Tax Return, Flexible Spending Accounts, Form 2441, Going Back To Work, Nannies, Payroll and Taxes, Savings For New Parents, Summer, Tax Credits, The Perfect Nanny
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